Ahead of the Curb

By Josh Stephens

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It takes only a passing comparison between the heavens floating above Grand Central’s main hall and the stained girders of the giant bus terminal across town to understand how the intercity bus ranks in American culture.

Many a movie scene has drawn inspiration from the gritty and mysterious characters that haunted the major depots of American cities, which invariably lack the grandeur that characterizes America’s great train stations. It’s no wonder that Rasto Rizzo, the hapless, penniless drifter played by Dustin Hoffman in “Midnight Cowboy”—ironically most famous for his line “I’m walkin’ here!”—succumbs to pneumonia in a Greyhound en route from New York City to Miami (as if anyone expected him to reach his destination). Many of the people who are riding the bus these days, though, bear much closer resemblance to Hoffman’s Benjamin Braddock in “The Graduate,” a handsome, bright college grad who drives an MG but finds love in the backseat of a bus in Santa Barbara. Millennials, yuppies, and countless other “discretionary” riders have been lured back to the bus by a new breed of service that has deliberately tried to shake off the stigmas of the past.

A Megabus rides through city streets in San Francisco. The line has

expanded its territories rapidly since launching six years ago and recently

served its 30 millionth passenger.

Upstarts Megabus and BoltBus began service in the U.S. in 2006 and 2007, respectively, just in time to serve the iPhone generation. Megabus began in the Chicago area while BoltBus first developed service in the Northeast Corridor between Boston and Washington, D.C. Essentially copycats of each other, Megabus and BoltBus rolled out brand new coaches, appealing liveries, easily navigable websites, relatively low prices, and, not insignificantly, curbside pick-up and drop-off. They endeavored to be everything that the conventional bus companies, such as Greyhound, Trailways and Peter Pan, were not (though BoltBus is actually a subsidiary of Greyhound/Peter Pan).

“Greyhound is a 99-year-old brand identity,” said BoltBus General Manager David Hall. “We started fresh with the consumer from day one and established our own.”

Hall compared Greyhound’s development of BoltBus to that of a hotel conglomerate with multiple flags.
“Hilton has 10 different hotel brands…from the Conrad Hilton all the way down to Hampton Inn,” said Hall. “We hoped to attract the consumer that wasn’t a Greyhound consumer, so it was less of a cannibalization and maximized growth.”

In fairness, BoltBus and Megabus are neither the inventors nor the lone operators of curbside intercity service. For years, so-called “Chinatown” bus services have operated in the East Coast. As their nickname implies, they often connected big-city Chinese enclaves to each other and were run by Chinese immigrants. Those services, however, are known for running run-down, uncomfortable vehicles and have often operated under a haze of derision.

“They didn’t have the Internet sales … but they did have the curbside bus service and pioneered that many years before Megabus did and they also had the different locations,” said Randall O’Toole, a transportation researcher with the libertarian Cato Institute. “They went where their customers wanted to go, not where the bus stations were.”

Their new counterparts are trying to offer something very different. Six years after coming into existence, Megabus (which prefers to go by Megabus.com) served its 30 millionth passenger earlier this year. BoltBus does not publish total ridership figures, but Hall said that its ridership has grown around 400 percent since 2008.

“[Megabus’ level of service] caught the imagination of the American consumer, because their perception of American bus service was not very high,” Megabus spokesperson Mike Alvich said. “They would rather walk.”
“Our biggest competitor is not another bus company. Our biggest competitor is the automobile,” Alvich said.

National Surge in Intercity Bus Travel

Recently, BoltBus expanded from its base in the Northeast Corridor to the Pacific Northwest, with service between Seattle and Eugene, Ore. BoltBus recently announced plans to expand into California. Megabus, with a larger network, operates throughout the Northeast, Southeast, Texas, and, as of recently, California.

Since 2008, DePaul University’s Chaddick Institute for Metropolitan Development has carved out a singular niche by conducting an annual survey of intercity bus service. The most recent findings, covering the year 2012, revealed an industry on the rise. In 2012 alone, intercity bus service increased 7.5 percent, the second-highest rate on record, after 2008. But this year’s numbers represent a significant increase in gross activities, with 3,879 daily operations at the beginning of 2013, up from 3,608 at the beginning of 2012.

From 1960 to 1980, services had declined a total of 1.8 percent annually, and from 1980 to 2006 they were in a death spiral of –2.6 percent annually—until Megabus rumbled into the picture. Of that 7.5 percent increase in 2012—in an industry still dominated by Greyhound and dozens of regional carriers—BoltBus, Megabus, and other so-called curbside carriers grew by 30.6 percent. This growth includes that of the new Greyhound Express and Peter Pan Express services, both of which were inspired by BoltBus and Megabus.

No one is more surprised by this turnaround than are the companies themselves.

“The demand is a little bit overwhelming, quite frankly,” BoltBus’ Hall said the company’s 400 percent growth since 2008, adding that “we’ve been blown away by the volumes, the customer reaction.” Hall said the company currently moves 50,000 passengers per week among 17 destinations, for an annual average of 2.6 million. By contrast, airline seat-miles and automobile miles traveled both grew by less than 1 percent in the same period; rail service expanded by 3 percent.

Branding, Amenities Create Separation

The popularity of BoltBus and Megabus begs the question of whether they have tapped into a previously repressed market or whether their services are so revolutionary that they have created the market themselves.

Operators like Megabus and BoltBus offer amenities like free

Wi-Fi and more comfortable seating than traditional buses

to make lengthy trips more palatable to riders.

“It’s a hard question to answer because it obviously takes lots of things to grow that fast,” said Joe Schwieterman, director of the Chaddick Institute. “We call it the perfect alignment of the stars. The obvious factors are that fuel prices went up and the airport hassle got worse.”

“They’re clearly filling a market niche that was a gap for the intercity bus industry,” said Stephen Schlickman, executive director at the Urban Transportation Center, University of Illinois at Chicago.

Then again, the perception of traditional Greyhound service meant that the new companies had a whole range of biases to overcome—and they seemed to have overcome every single one of them. Perhaps cannily, both companies chose not to make incremental changes to the traditional intercity bus model. They presented themselves as brand-new services with the full complement of amenities from the onset, so as not to appear merely if putting lipstick on a dog.

Onboard, both services have taken a cue from their upstart brethren in the airline industry, such as JetBlue and Virgin America. BoltBus’s interiors in particular look suspiciously similar to the black leather seats of Virgin America’s aircraft.

Most importantly, both bus services offer the most important amenity that enables students, young professionals, and pretty much everyone else to tolerate what would otherwise be as many as six miserable hours behind the wheel or in a rolling prison: wireless internet.

“People are willing to accept longer rides in a coach seat because they’re armed with their personal technology,” said Schwieterman. “Twenty or 10 years ago, it was all about speed … because travel is negative. Now people are quite willing to sit in a coach seat for four to five hours because they bring their life with them.”

Curbside Pickup Convenient, Cuts Costs

The use of curbside pickup has also enabled BoltBus and MegaBus to avoid significant capital costs. The strategy makes sense: Whereas airlines need runways and security checks and trains need tracks and platforms, buses need only a few dozen feet of curb space.

A BoltBus picks up passengers at a curbside stop in Oakland, Calif.

Company officials say that eliminating the need to build and maintain

official stations keeps fares down.

“The construction, upkeep and maintenance of facilities is an important factor for your overall cost of services,” said Schlickman. “By eliminating those needs and those costs, they can be much more competitive with their fares.” He also said that the new companies may not be burdened by old, expensive labor agreements.

They are also appealing to a generation of riders that are too young to remember the heyday of decrepit bus stations and too immersed in their use of technology to bother with something as old-fashioned as a car. Indeed, the rise of curbside buses corresponds nicely with a general preference among Millennials towards dense urban living and the abandonment of personal automobiles. In other words, BoltBus and Megabus have a natural customer base among Brooklyn’s hipsters, Manhattan’s aspiring bankers, and Boston’s students.

“Up to about 40 percent of the current emerging generation have no interest in driving,” said Schlickman. “I think for that market, definitely other features such as Wi-Fi and the ‘hip’ nature of the service might be more important.”

All of this is a welcome development not only to roving students and dot-com magnates, but to free-market advocates. Because of its reliance on public infrastructure and its central role in the national economy, the transportation industry has always had a fraught relationship with government. Critics have long contended that all sorts of government involvement—from anticompetitive regulations to the construction of physical infrastructure—have made transportation less efficient than it should be.

“I think it’s great,” said Cato’s O’Toole. “Since about 1964, transportation in America has been increasingly…bureaucratized, subsidized, regulated and so on. They’re figuring out ways to rely on shared infrastructure—highways are used by cars, trucks, buses and so forth—and not have a lot of their own infrastructure.”

Safety and Legal Controversies

What makes economic sense has been, at times, a headache for the companies themselves. By venturing away from traditional bus depots, they run the risk of monopolizing curb space and commercializing places that have not traditionally been commercialized. Recently, crowds waiting for Megabus outside of its Madison Square Garden stop compelled the company to move its pickup location farther west, near the Javits Center. Meanwhile, the cities of Boston and Washington, D.C., force the companies to use their respective bus stations and, consequently, pay usage fees.

The locations for stops also run the gamut from major transit hubs to smaller local landmarks. A rider in Newark, N.J. would board in front of Penn Station, while users across the river in New York City are instructed to wait in front of the Tick Tock Diner on Eighth Avenue.

These differing approaches mean that the companies must navigate different relationships in all of their markets.
“Each one of the 17 is a totally unique animal, which is somewhat frustrating,” said Hall. “Baltimore is completely casual and a handshake arrangement. Whereas 39 miles down the way in Washington, D.C., it’s a borderline nightmare. We have to have a separate strategy and thought process on each one.”

While each company must fight their minor battles for curb space, O’Toole said that the biggest—and perhaps only—threat to their continued success is, literally, the threat of danger. An accident or poor safety record can be, and has been, devastating for a bus company.

BoltBus and Megabus have, in fact, already benefitted from other companies’ safety problems. Following the crash of a Chinatown bus that killed
15 people in 2011, the Federal Motor Carrier Safety Administration launched an investigation into curbside carriers. Finding rampant safety violations, they forced the closure of 26 companies, including the Fung Wah service that ran between Boston and New York and is considered the original curbside carrier.

However, O’Toole questioned whether the companies were more the victim of bad reputations, citing an article that contended the Chinatown carriers didn’t have higher accident rates than the industry as a whole.

“Megabus and Greyhound are very happy to see their competition shut down,” O’Toole said. “That bothers me. As a free marketer, I want to see them all have a chance.”